Employers in the farming industry should be aware of the recent changes to KiwiSaver.
KiwiSaver has now been with us for over a year, but with all the changes to the scheme it can be hard to keep track of your obligations. In this article, we briefly explain what farmers need to know about KiwiSaver from an employer's perspective and some of the changes that came into force on 1 April this year (no joke for most employers).
Who can join KiwiSaver?
New Zealanders between the ages of 18 to 65 can join KiwiSaver. New employees are automatically enrolled in KiwiSaver and may opt out within two to eight weeks of starting work. Existing employees may voluntarily join KiwiSaver.
Employees who are not automatically enrolled in KiwiSaver:
- Temporary employees who work for less than 28 days.
- Casual agricultural workers (a casual agricultural worker is defined as a person engaged on a day to day basis for less than three months for the exclusive purpose of doing seasonal agricultural, horticultural, market gardening, nursery, orchard, or tobacco farming work).
- Casual employees who work on a basis that is so intermittent or irregular that they are not entitled to receive paid holiday leave and instead are paid holiday pay with their wages (new from 1 April 2008).
Compulsory employer contribution
From 1 April 2008, if the employee is a member of KiwiSaver, employers must contribute a percentage of the employee's gross salary or wages to KiwiSaver. The level of employer contribution is currently 1% and will be phased in to 4% by 1 April, 2011.
An employer's obligation to contribute only applies to employees. Contractors (e.g. sharemilkers) contributing to KiwiSaver are not entitled to any employer contribution.
A shareholder-employee (someone who is both a shareholder and an employee of a company) who is subject to PAYE may join KiwiSaver as an employee and will be entitled to receive the compulsory employer contribution.
If certain criteria are met, employers who are currently contributing to an employee's existing registered superannuation scheme may be able to offset that amount against the compulsory employer contribution required under KiwiSaver.
Employer tax credit
From 1 April 2008, employers can be reimbursed for their employer contribution to KiwiSaver up to a maximum of $20 per week for each employee that is part of KiwiSaver. The employer tax credit can be claimed at the time of filing PAYE returns.
Farmers who voluntarily contribute toward KiwiSaver on behalf of contractors are not entitled to claim any tax credit.
Keep an eye out for our article next month on the effect of the proposed Climate Change (Emissions Trading and Renewable Preference) Bill on the agricultural industry.
The content of this document is necessarily general and readers should seek specific advice on particular matters and not rely solely on this document.
If you would like more information on any of the topics in this document, please contact your usual Auld Brewer Mazengarb & McEwen adviser.